Awaking from the ‘China Dream’

By Lin Cho-shui 林濁水 /

Wed, Jan 02, 2013 - Page 8

A certain Chinese-language newspaper recently ran an editorial entitled: “Change Needed If We Are to Break the 22K Spell.” The 22K referred to was the NT$22,000 that university graduates can expect to earn as a starting salary, a figure lower than it was 14 years ago.

The percentage of higher education graduates emigrating once they finish university to search for employment has now reached 61.1 percent, the highest in the world, the editorial said.

It added that over the past 20 years Taiwanese manufacturing increasingly relied on a business model in which Taiwan-based companies take orders for goods, but outsource the production of those goods to manufacturing plants based overseas, especially in China.

While this has been happening, salaries at home have stagnated.

Taiwan has rapidly revamped its business model by shifting its manufacturing base to China, ignoring continued investment and improvements in its domestic industry.

The unfortunate product of all this is that graduate salaries are slumbering under the 22K spell, the editorial said. If this spell is to be broken, the current growth model has to change. If Taiwan is to increase domestic demand and local manufacturing, as well as stem the graduate outflow, it is going to have to change the way it approaches domestic investment and labor costs.

This article is for the Liberty Times (the Chinese-language sister newspaper of the Taipei Times). The Liberty Times has been arguing for a more “local” economy for 20 years. Now, the United Daily News, the Chinese-language newspaper that published the editorial, has finally come around to this way of thinking.

One could say that during the past five years under President Ma Ying-jeou (馬英九), many have been living a kind of “China dream,” one that the United Daily News has supported all the way.

Only now is it waking up and smelling the coffee.

In the late 1980s, the nation had just embarked on its democratization process and cross-strait relations were starting to thaw after 40 years.

Taiwan was riding high, doing better than the other “Asian Tigers,” and China looked to it for investment, technology and its original equipment manufacturing business and export model. This was China’s “Taiwan dream.”

Not long after Taiwan started on its “China dream.”

Several academics, both excited by the thawing relations between the two sides and troubled by pangs of remorse at having abandoned China to indulge in its culture in Taiwan, wanted to extend a helping hand to the old country and give it the benefit of Taiwan’s experience. They wanted to see cross-strait economic integration, dreaming of a “Greater China” economic conurbation.

In the early 1990s, former president Lee Teng-hui (李登輝) got caught up in the “China dream,” hoping that China could become a kind of economic hinterland for Taiwan. What he saw was a market comprised by China’s 1 billion strong population, and how this could help make Taiwan a business hub in the Asia-Pacific region.

He envisaged using the thaw in cross-strait relations to exploit China’s position and qualities to develop an Asia-Pacific hub in six major areas: shipping, air freight, manufacturing, finance, telecommunications and media.

Lee would later temper his enthusiasm by introducing his “no haste, be patient” policy and ultimately abandon the China dream.

However, following his departure from the Chinese Nationalist Party (KMT), the party took up the dream again.

At this time, China’s was starting on its path to becoming an economic juggernaut, just as Taiwan’s economic growth was slowing down and the nature of the China dream slowly began to morph: It went from being a dream of a Greater China economic area guided by Taiwan, to a situation in which Taiwan would become entirely dependant on the Chinese market.

Taiwan was standing on the shoulders of the Colossus of China –– a dream coined as a cross-strait common market.

Ma’s “6-3-3” plan — his promise of an economic growth rate of 6 percent, an unemployment rate of less than 3 percent and per capita income of more than US$30,000 within his first term of office — has become a bit of a laughing stock.

Ma contends that he was fully justified in believing he could deliver on his promise when he made it.

According to Ma, the plan was only dashed as a result of the global financial crash that originated in the US. In this he is being disingenuous. Apparently, he and his advisors would have the public believe that they were blissfully unaware that the crash when it occurred.

This seems unlikely, because at the time former vice president Vincent Siew (蕭萬長) had noted that the US financial crisis was extremely serious and that the US was in decline, with the caveat that there was no need to panic because Taiwan could always rely on China.

With the “direct three links” in place — trade, transport and postal communications — Kaohsiung Harbor could become an Asia-Pacific shipping hub and the cross-strait common market would ensure that Taiwanese goods would have an advantage in China over goods from other countries.

The China dream appeared to be rosy and the 6-3-3 plan looked entirely reasonable.

The reality was not so optimistic, and despite the official restoration of the three links on Dec. 15, 2008, the shipping container volume going through Kaohsiung Harbor for the years 2009, 2010 and 2011 — 8.58 million, 9.18 million and 9.64 million standard crates respectively — did not attain the 9.67 million-crate volume recorded in 2008, or the 10.25 million crates in 2007.

China had evidently already woken from its Taiwan dream and was now realizing its own. Its manufacturing strategy had moved from following Taiwan’s lead, to competing with it directly.

Ma has made the mistake of believing that reliance on China would give Taiwan more access to the spoils of China’s success.

The much-touted establishment of the three links meant that foreign vessels and foreign-registered vessels were prohibited from using these routes, proving a headache for shipping companies and ports alike.

With the signing of the Economic Cooperation Framework Agreement and the supposed trade benefits it would bring, Taiwan lost sight of its goal of signing free-trade agreements with other countries, creating problems for companies such as Formosa Plastics and LCD panel makers.

As it turns out, Beijing’s interpretation of the China dream was its own dream, its own industrial strategy and had nothing to do with complying with Ma’s interpretation.

Most important, in relying exclusively on China and investing too heavily in the “three links” has led to China beginning to replace Taiwan’s manufacturing base.

Consequently, Taiwan’s industry has been hollowed out: Unemployment continues to rise — with no indication of improvement — and there is increasing inequality in income distribution.

Five years ago, Ma led everyone on a China dream that he dressed up as a panacea. Many are only now starting to wake up from it, not long after Ma, with China’s help, secured his second term.

The trouble is that Taiwan has squandered five years’ worth of time, effort and resources. In waking up from the China dream, the nation faces three casualties: Ma’s popularity ratings, the degree to which Taiwanese identify themselves as Chinese and the nation itself.